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Most of us would like to have additional money to spend even when we have retired with enough to sustain a planned for standard of living. I marvel at NewbieHere and Mathjak who appear content, do not see the need for additional money and only see anything extra as more inheritance they will leave behind.
Anyway that is definitely not my situation. I retired with less than I really wanted because I was worn out with the stress and just plain ready. Since then my assets have doubled a couple of times over...or at least close to it. Even so I would like more. Last year we increased our monthly spending by about $1500. This year we adding another $1500/mo to the $1500/mo from last year. We still have a modest lifestyle. We canceled our one major trip because it was topping out at over $20K. We don't have a boat, or fancy new cars and we certainly don't try to keep up with the neighbors.
If you do not care about making additional money then any advice you give to the OP or others trying to get ahead might not make a lot of sense.
so my question is why are you not 100% equities . look at how much money you left on the table . especially because you say you will have the ability to see this recession coming and preserve everything extra you hung in there for .
if more and more is what is you are seeking then you are not doing the best thing . in fact you should refinance and throw as much of a a mortgage back on the house and invest that money and take your own advice
so i don't understand your logic and advice vs what you are doing
could it be even you have a line in the sand or suspect you won't see this next downturn that is not just noise and it will already erase your extra gains and more before you realize this is not just noise ? obviously if more and more is what you want you are not doing what you should be doing to get it .
i know i balance risk vs reward vs my goals and my strategy is to keep that carrot off the stick . but you profess wanting to do the opposite yet you are not .
Last edited by mathjak107; 01-02-2020 at 02:53 AM..
Your reductio ad absurdum argument just seems silly and really does not apply to this issue. I never said that 100% stock allocation was recommended. In this case the OP seems to be young/middle aged and a high allocation would make sense. It is not at all necessary to be at a very high allocation to be able to take advantage of mortgage money. Anyway it is not the stock allocation that is important, it is the total return. You claim that even a PP portfolio will match or exceed performance of a 60:40. Either would work to provide coverage of the mortgage amount and a sizeable excess for compound growth.
Your reductio ad absurdum argument just seems silly and really does not apply to this issue. I never said that 100% stock allocation was recommended. In this case the OP seems to be young/middle aged and a high allocation would make sense. It is not at all necessary to be at a very high allocation to be able to take advantage of mortgage money. Anyway it is not the stock allocation that is important, it is the total return. You claim that even a PP portfolio will match or exceed performance of a 60:40. Either would work to provide coverage of the mortgage amount and a sizeable excess for compound growth.
you are promoting in every thread going for more and more for yourself and telling others they are leaving money on the table ... it certainly does apply ...
you are telling others they are leaving money on the table via their actions yet you wont go pedal to the metal either in your actions ... so i am confused as why it is okay where you decide to draw the line in regard to risk vs reward but not okay where others draw the line ?
my opinion is at these interest rates the risk vs reward for borrowing money to invest is poor in a balanced portfolio , it is fine if it is not borrowed money so i don't want anyone to misundertand this .
so paying the mortgage is likely the better choice compared to risk vs reward for a balanced portfolio that is using leverage .
i would leverage 90-100% equities using a mortgage if i was younger and not retired.
i mean if you want to compare to results where we have not completed the negative part of the cycle yet in a decade , then why not compare the decade from 2000 where on an inflation adjusted bases it took 12 years to get back , all the while paying interest and losing money too .... it can go both ways .
Last edited by mathjak107; 01-02-2020 at 08:21 AM..
I would definitely take advantage of all your tax advantaged accounts first - with both of you having good jobs in LCOL area it should be no problem to max out your 401K's, Roth IRA's and maybe even HSA if that is available. Those are annual tax advantages that are "use it or lose it" so don't miss out on that opportunity.
After that, paying extra against the mortgage would seem to make sense.
Alternatively, you could contribute toward a taxable brokerage account with the goal of using that money to pay off the mortgage in a lump sum. This would give you greater flexibility and may work out better mathematically in the long run.
you are promoting in every thread going for more and more for yourself and telling others they are leaving money on the table ... it certainly does apply ...
you are telling others they are leaving money on the table via their actions ..... .
I think you are so anxious about the sky falling, you did not pay any attention to what I wrote. I explained how I handled my mortgage and how I invested. I never told anyone how they should invest or what allocations they should pick. In fact I told the OP that if they did not know how to invest and thought it was wise to pay down the mortgage, then that is what they should do.
As to my allocations, of course, I am not interested in going 100% equities. I would not recommend that especially for someone who is 73. There is a diminishing return for pushing a high stock allocation. Some level of diversification is always wise and other assets can often offset declines in stock returns. This is not a novel idea.
I had a HELOC in 2013, the market went up 30% too. In most of these threads, people already made up their mind, I usually stay out of it except when people making outrageous comment like rent free after you pay off the mortgage or something like that.
still beating this horse? It’s ok if you don’t get it but let it go already.
I think you are so anxious about the sky falling, you did not pay any attention to what I wrote. I explained how I handled my mortgage and how I invested. I never told anyone how they should invest or what allocations they should pick. In fact I told the OP that if they did not know how to invest and thought it was wise to pay down the mortgage, then that is what they should do.
As to my allocations, of course, I am not interested in going 100% equities. I would not recommend that especially for someone who is 73. There is a diminishing return for pushing a high stock allocation. Some level of diversification is always wise and other assets can often offset declines in stock returns. This is not a novel idea.
Appreciate the strategy you're using and think it's done well. I took a mortgage because that is the only way I was going to purchase my house. I decided year #5 to stop paying so much extra on the mortgage and instead invest those extra $$$ into VTSAX each month.
I still make an extra mortgage payment each year, since 1/2 my mortgage is paid every 2 weeks. I like this setup. The beauty of using a strategy like this is flexibility. I can always start putting extra $$$ back onto the mortgage if I want to, but so far I haven't wanted to. Conservatively-speaking, I could be in a position to pay off my mortgage in one chunk just from low/average returns on my invested extra money, in about 7 to 8 years, if I wanted to.
You were very balanced in advising the OP to pay down their mortgage *if* they felt uncomfortable with figuring out how to invest.
Housing is the largest household expense and so it makes a lot of sense to get it out the way first and then do all other types of stuff. Prior to paying off my mortgage I was focussed on RE investments and most of my investments are in RE. While you are happy to watch your stock portfolio grow, I on the other hand get a check from my tenants at the end of every month and soon I will have a minimal housing expense.
If I stop working, I can still live in the same house and I'm not at the mercy of the stock markets all while I still collect rent from my tenants. If the stock market crashes and you also end up losing your job, it will be a repeat of the financial crisis where guys got taken to the cleaners and lost everything because their investments were tied to the financial markets. I'm not.
Quote:
Originally Posted by jrkliny
So, I am confused. Io thinks it makes sense to pay extra money towards paying off a mortgage at 2.6%. Last year that same money would have earned about 20% invested in stocks. Other assets also did quite well so even a much more conservative allocation would have done well, possibly even the same or better. How can anyone take pride in making such a very poor choice with such a very a poor outcome?
My mortgage is a very manageable portion of my yearly spend. Even if my mortgage was paid off in one fell swoop, I still have to pay property tax and insurance, along with utilities and such. So it's not like my monthly amount would decrease by *that much* to make it worthwhile to own outright. I could write the check today to pay it off, but with a low interest rate I'd rather use that money for other purposes.
My mortgage is a very manageable portion of my yearly spend. Even if my mortgage was paid off in one fell swoop, I still have to pay property tax and insurance, along with utilities and such. So it's not like my monthly amount would decrease by *that much* to make it worthwhile to own outright. I could write the check today to pay it off, but with a low interest rate I'd rather use that money for other purposes.
Godere la scelte
My property taxes and insurance run me roughly 1k a month
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